CA Trust, Estate & Probate Litigation

CA Trust, Estate & Probate Litigation

The Estate Planning Safety Valve: California Disclaimer Trusts

Posted in Planning, Trusts

AvoidEstate TaxExplosion

Will your estate be subject to estate taxes at the time of your death? That may not be so clear. After all, Congress seems intent to keep changing the estate tax laws. In recent years, the estate tax has been set to apply only to estates that exceed $5 million in value, with an inflationary adjustment that makes the estate tax limit $5.45 million in 2016. But Democrats want to lower the estate tax limit and Republicans want to repeal it altogether. Who knows what the future holds.

That’s where Discretionary Trusts come in. If you have an estate that potentially could be above the estate tax limit when you die (and who knows what that limit will be), then you may benefit from a Disclaimer Trust.

A disclaimer is simply a declaration by the recipient of an inheritance that they don’t want the property. There are a number of rules that apply to disclaimer, but the two you should know is that (1) a disclaimer must be made in writing within nine months of the decedent’s death, and (2) you cannot control where the property goes after you disclaim it.

Legally speaking, you are not obligated to accept a gift. And if you disclaim that gift, you are saying you do not want it and will not take any control over it. By doing so, the gift will pass according to the Trust terms as if you died before the Trust settlor. That means you wash your hands of the gift and you have nothing more to do with it.

In tax planning, we use the disclaimer to our advantage by providing Trust terms that direct the disclaimed assets to a trust (aptly named the Disclaimer Trust), where the assets are held for the benefit of the surviving spouse. This allows the surviving spouse to disclaim assets for tax planning purposes, and then have the assets pass into a Disclaimer Trust to be held for the survivor’s benefit.

If you have ever heard of a Bypass Trust, then you already know what a Disclaimer Trust is. A Disclaimer Trust is just a voluntary Bypass Trust that the surviving spouse can elect to create after the first spouse’s death. Whereas Bypass Trusts are mandatory and must be created after the first spouse’s death.

In other words, a Disclaimer Trust is merely a safety valve that allows the survivor to disclaim whatever portion of the estate would be over the $5.45 million mark after the surviving spouse’s death. Once that determination is made, the assets can be disclaimed, and the Disclaimer Trust is created.

So even though Congress has no idea what it will do with the estate tax limit, you can rest assured that any future estate tax can be properly dealt with and planned for simply by including a Disclaimer Trust in your revocable living trust.

Effective oral arguments in court

Posted in Litigation, Probate Court Litigation, Trust & Will Contests

The strength-2

I have seen many lawyers argue themselves OUT of a win by talking too much in court. The first rule of oral argument in court is that if you do not need to say anything because the judge is agreeing with you, then SHUT UP. You do yourself no service by re-hashing a point the court already accepts, and you run the risk of changing the court’s mind against you.

In those cases where the court is not going your way, then you do need to speak up. And here is the best advice I can give anyone speaking with a judge in court: listen to the judge and answer his or her question. Sounds simple enough, but again it is rarely practiced.

So often people come to court prepared to argue what they think the issue is, or what they fear the weak point is. But the court often sees the issue a little differently. You have to understand your legal arguments and be prepared to speak, but arguing a point the judge is not asking about is a waste of time and effort. More importantly, you can frustrate the judge and lose the argument altogether.

The best oral arguments I have had in court come from entering into a conversation with the court. The judge raises an issue or question, I listen to what he or she is asking about, and I formulate my response to address that concern.   You must always remember that you are engaging in a conversation with the court. Coming into court with a pre-packaged argument and then not varying from your script is a sure recipe for disaster.

And when the court agrees with you and starts peppering the opposing party with questions, shut up.  At times, your best argument can be silence.

Make your point: How to write a winning brief

Posted in Litigation, Probate Court Litigation, Trust & Will Contests


How do you write a winning brief? Say what you are going to say, say it, and then say what you said. That is an old rule in writing and it applies to well written legal briefs also. The biggest problem with most written legal arguments is the length. As Winston Churchill once said of a very lengthy report “This document by its very length defends itself against the risk of being read.”

Judges are busy people. The court staff who review most of the pleadings before the judge reads it are also busy people. They have to sort through thousands of pleadings on a daily basis and try to make sense of it all. Yet so many people (lawyers included) think that the judge has a full Sunday afternoon dedicated to siting down with a nice cup of tea and fully reading and enjoying your written pleading. No, no, no. At most a judge may have fifteen minutes to review your work and determine what points you are making.

That means written legal arguments must be presented in a very different manner than any other writing. First, you have to tell the judge what you want him or her to do. What action should the court take? Just say it upfront. For example “the Court should grant this motion because ….” The word “because” is very important because (see what I did there) it forces you to put a point on your thought. If I say “the court should grant this motion” and stop there then the judge does not know why that should be done. Tell the judge why as soon as possible. Do it in your first sentence.

Next, you have to tell the judge what legal authority you have to support the request. Judges like to follow the law (its kinda their thing), so give them the law. It should be short and to the point. Not so short that it makes no sense, but also not any longer than required to convey the point.

Finally, conclude and get out. Your job in any written legal argument is to say what you need to say as quickly and clearly as possible and then STOP. There is no reason to restate the points again, and again, and again. Some lawyers just cannot help themselves from writing too much. There is also a fear that the point may not be made. But in reality it is often the smallest light that cuts through the fog. Simple, concise language covering less than a page conveys a better and more powerful message than ten pages of legal prose.

Not too much…and not too few: Reciting the facts of your California Trust or Will lawsuit

Posted in Capacity & Undue Influence, Litigation


Facts_ Not too much...not to few-4

When you are faced with a California Trust or Will lawsuit, you have to respond. But what does a response look like? How much do you have to say and what effect does your response have on your case?

Responses are funny things. Sometime a Judge may read the response prior to your next hearing and have some comments on the facts involved. Sometimes they will not do so. In theory, everything you state in a response is hearsay and cannot be used as evidence by the Court. In practice, that is usually the case, but not always.

At times, a response is never reviewed by the judge, and the case simply progresses to trial where only the evidence presented in the courtroom is considered. Other times, the response is read and affects any number of preliminary rulings by the court.

As a result, your response needs to be prepared to give enough details to help, when needed. But your response should not give too much detail either, in the event facts or evidence changes over time as discovery is conducted. Sometimes a favorable fact becomes hard to prove if witnesses or documents fail to support the presumed fact. For that reason, you do not necessarily want to state every presumed fact at the outset of your case. Just state what you know. If you do not know a fact, but believe it to be true, then you can say that.

Remember that responses must be verified under penalty of perjury—so don’t lie in your response. You want the facts contained in your response to be as truthful as possible. But every case has a few unknown or obscure facts that must be ascertained or clarified along the way.

In all, your response should be short and to the point. The term “short” being relative to the complexity of your case. Don’t worry about leaving something out because you will have plenty of opportunity to fill in the missing information at time of trial.

Great California Trust and Will lawyers need great judgment

Posted in Litigation


Good Lawyers need Good Judgment

Law is a subjective pursuit. Only after everything is said and done can you look back and diagnose the good and the bad. But when you are in the heat of battle in a lawsuit, there rarely are any clearly right answers…or clearly wrong answers for that matter. Sometimes you just have to jump off a cliff and hope for the best.

Presenting your case in a court of law is highly subjective. Ultimately, only the viewpoint of the judge or jury matters, and their viewpoint may be very different from your own. Remember that you have lived with your case for years before it ever sees the light of day at trial. In some Trust and Will cases, the family issues have taken decades to develop to the point where litigation starts. There is no way a judge or jury will understand or see the issues from your perspective…not completely.

The goal then is to exercise good judgment to decide how to present your case at each stage of the litigation. By the time you get to trial, you should know a lot about the evidence you have, the witnesses you have, and (more importantly) the evidence you do NOT have. You should also know the facts, witnesses, and documents the opposing party has as well.

The mistake many parties make is to take ALL the facts, witnesses, and documents into trial to present to the judge or jury. That can be a BIG mistake. Trying to deluge a judge or jury with too much information is a great way to paralyze them from making any decision.

The better approach is to narrow down the information to the most important issues you want to address. You don’t want to carpet-bomb the court, you want to make a targeted strike that will get to the heart of the issues you care the most about.

For example, if you want to have a Trustee removed, focus on the facts that support removal, but do not focus on facts that have nothing to do with removal (such as the Trustee’s DUI from twenty years ago, or their ten-year-old bankruptcy filing). Facts from the distant past rarely persuade a judge to take action NOW. For Trustee removal, you need facts that show imminent danger will occur if removal is not granted.

Moreover, you really need to pick your top three strongest arguments and go only with those three points. And then drop two of them. It sounds silly to narrow you case to a single point, but the beauty of simplification is that it makes decisions simple. The problem with simplification is you must exercise good judgment to decide which arguments to focus on. Plus, it takes a lot of work to figure out which claims are the best versus the worst.

Judgment makes all the difference when it comes to simplification. And without simplification, your case is sunk because confusion causes paralysis in decision making.

Legal Loopholes: How California Trustees Escape Liability

Posted in Trust Administration, Trustee Breach of Trust, Trustee Removal

Will your Trustee

You may be surprised to learn that there are a number of ways that a bad Trustee can escape liability in Court. For starters, if the Trustee disclosed a questionable transaction in writing to you, you only have three years in which to file a lawsuit. But that’s just the start.

Consent, release, and exculpation come next. If you consented to a transaction before it was taken, you may have waived your right to complain about that transaction in the future. The same applies with a release, if you signed a release of liability, then you may have waived any lawsuit against the Trustee for wrongdoing. Luckily, both consents and releases require that you be given full disclosure of all material facts and circumstances surrounding a transaction; otherwise the consent or release is invalid.

And then we come to exculpation. Exculpation is a terrible Trust provision that says a Trustee does not have to take responsibility for being negligent with Trust property. That means a Trustee can violate any of his or her duties as Trustee, and there is nothing you can do about it. There is one catch, every Trustee is still liable for gross negligence, recklessness, and intentional harm. But each of those claims are harder to prove than basic negligence. In order for exculpation to work, the Trust has to specifically provide for it in the Trust document. Most people who create Trusts that contain an exculpation clauses have no idea the clause is there or what it even means.  Unfortunately, exculpation can cause more harm than good to the Trust assets.

Finally, there is good-old fashioned equity. If all else fails to let a Trustee off the hook, the Court is authorized, in its discretion, to excuse any Trustee wrongdoing. Probate Court’s are courts of equity, meaning they do not just apply to the law, they also are given wide discretion to determine what is fair and reasonable in a given situation.  If a Trustee has breached a legal duty to the Trust and caused damage, the Court still has the power to excuse the Trustee’s breach if the Court believes it fair to do so.  This can be a huge loophole that allows Trustees to escape legal liability for their mistakes.

The bottom line: it is not so easy to hold a Trustee accountable.  There are many ways in which a Trustee can escape liability even where harm is caused to the Trust assets.  That means it is up to you to build your case, and tell your story to the Court, so equity falls in your favor instead.

It You Got ‘Em…Flaunt ‘Em: A California Trustee’s Duty to Use Special Skill

Posted in Trust Administration, Trustee Breach of Trust, Trustee Removal

What's your-2

“If you got it, flaunt it baby!” That’s one of my favorite lines from the movie The Producers by Mel Brooks. The same can be said of California Trustees (although not referring to their looks of course). For Trustees, if you have a special skill you are expected to use them.

For example, if you are an expert in investing, then you have to use those skills for the advantage of the Trust. And you will be judged based on your increased skills if anything should go wrong.  If you are a CPA or lawyer and you undertake Trusteeship of a California Trust, then you will be expected to use your professional skills to administer the Trust.

For example, lawyers should have a higher degree of knowledge of the Trust laws, especially Trust lawyers. So when a Trust lawyer acts as Trustee, those skills must be used. And if anything goes wrong, the Trustee will be judged based on a higher standard of skills than an ordinary Trustee.

Having a Trustee with special skills that helps in Trust administration is a great idea. For example, a Trust that is heavily invested in commercial real estate would do well to have a Trustee who is skilled in commercial real estate. Settlors oftentimes look for this type of expertise when selecting a successor Trustee.  Or at least they should look for this special skill when selecting a Trustee.  After all, many Trust lawsuits involve Trustees who did NOT handle Trust investments properly because they simply did not know what they were doing.

But that extra level of skill comes with a catch—a higher expectation under Trust law. So if you are an expert, you must be aware that your expertise can be a benefit to the Trust, or a burden to you if things go wrong.  You are not going to be judged as your average-Joe Trustee, but as your highly skilled Trustee.

The best protection against a lawsuit for a skilled Trustee (or any Trustee for that matter) is to have a process in place that you use to mange the Trust assets and make decisions.  The exact details of the process are not as important as having a process at all.  So many individual Trustees will make decisions and invest assets without any written game plan.  When investments take a dive, the Trustee is immediately accused of making a mistake and with no written process in place, the Trustee has nothing to point to as being the basis for the decisions that were made.

Having skills is a mixed blessing.  It is great for the beneficiaries, when those skills are put to good use managing the Trust assets.  But when things go wrong, those same skills may create a higher threshold to escape legal liability than would otherwise apply.

The Downside Of Co-Trustees In California Trusts

Posted in Trustee Breach of Trust

Is your co-trustee

Acrimony between Co-Trustees can raise significant problems. Co-Trustees each have a duty to participate in the administration of the Trust (PC 16013). A Co-Trustee also has a duty to prevent the other Co-Trustee from committing a breach of Trust, and compel a Co-Trustee to repay damages caused by a breach of Trust.  That can be a tall order when dealing with a difficult Co-Trustee.

Let’s start with participation. Each Co-Trustee has an affirmative duty to participate in the administration of the Trust. That makes sense in theory because there is no reason to have two or more Co-Trustees if any of them refuses to participate (might as well just name one Trustee).  But in practice it may be difficult for two Co-Trustee to participate, especially if they do not get along. This happens quite a bit when two siblings are appointed as Co-Trustees. There can be (in some families) a built-in animosity between the parties that causes the Trust administration to stand still.

Worse yet, if one Co-Trustee actively tries to exclude the other Co-Trustee from participating, then this duty to participate is impossible to meet. In most cases where two or more Co-Trustees cannot get along, one of them has to go.

This brings us to the next part of the duty, to stop a breach of trust. That can be a real problem when you have a runaway Co-Trustee. Difficult Co-Trustees are not so easy to control, let alone preventing a breach. In most cases, the only way to stop a breach is to file in Probate Court and seek an order against the Co-Trustee. And as long as you continue to be a Trustee, you have an affirmative duty to take action—including Court action—if necessary.

The same is true of a Trustee’s duty to force a Co-Trustee to pay back any damages caused by a breach. In most cases, Court action will be required to accomplish this duty. Most Co-Trustees who cause harm to a Trust are not going to pay for the damage willingly. It does happen at times, but more often it is a lawsuit waiting to happen. But happen it must, because a Co-Trustee has a duty to seek the repayment of damages.

It is not so easy being a Trustee, and that is especially true of Co-Trustees. It is important to know your duties, and then keep a watchful eye on your Co-Trustee.

The Buck Stops…Where? California Trustees duty NOT to delegate

Posted in Trustee Breach of Trust


Funny thing about Trustees, they are expected to seek help, just not too much help.  Generally, Trustees are not allowed to delegate their duties (see Probate Code section 16012).  The rules state that anything the Trustee can “reasonably” be required to personally perform cannot be delegated.  And the Trustee can never delegate the entire administration of the Trust to someone else.

Where a Trustee does delegate some matter to an agent or co-Trustee, the Trustee still has a duty to supervise that person in the performance of the delegated matter.  That means a Trustee cannot simply delegate and forget about it.  The Trustee is required to oversee the agent and make sure that the job is being done in the best interests of the Trust.

There is one big loophole this the nondelegation rule: investment and management decisions.  Under the Uniform Prudent Investor act, a Trustee has the power to delegate certain financial decisions (see Probate Code section 16052).  This exception allows a Trustee to delegate financial decisions “as prudent under the circumstances.”  But the Trustee retains the duty to (1) select a good agent to act for the Trust, (2) establish the scope and terms of the delegation, and (3) periodically review the agent’s performance.

Here’s where things get interesting.  Where a Trustee has properly delegated financial decisions to an agent, the Trustee CANNOT be held liable for those investment decisions.  That can be a shocking result for a beneficiary who seeks to hold a Trustee liable for bad investment decisions.  Of course, the agent to whom investment decisions were delegated can be held liable for bad investment decisions.  But that just means the beneficiary may find himself suing a large financial firm rather than the Trustee.

The good news is that financial advisors rarely will agree to accept delegated financial responsibility for a Trust–primarily because of the liability involved in doing so.  Yet, so often Trustees who make bad investment choices will try to pass the buck to the financial advisor.  It then becomes the beneficiaries job to determine whether the investment power was delegated or not.  It could mean the difference between suing a Trustee or suing a large financial institution.

If you happen to be a Trustee, choose your delegation wisely.  Even with the job being handed off to someone else, you may still be on the hook for a bad decision.


Duty To Defend: A California Trustee Must Defend The Trust

Posted in Trustee Breach of Trust, Trustees & Beneficiaries


As Trustee, you have a duty to defend the Trust in actions and lawsuits filed against it. This duty is the flip side of a Trustee’s duty to enforce claims, where a Trustee must sue to enforce a debt owed to the Trust.

The duty to defend requires the Trustee to take all reasonable action to protect and preserve the rights of the Trust. If a lawsuit is filed against the Trustee, then the Trustee must act to defend that lawsuit. Of course, the Trustee is allowed to use Trust monies for this purpose. And we generally want Trustees to do that so a proper defense can be paid for by the Trust.

Unfortunately, the Trustee’s ability to pay for a defense from the Trust funds can work against a beneficiary who is suing the Trustee. It is one thing for the Trustee to defend a lawsuit from an outsider, but to use Trust money to defend a lawsuit brought by a beneficiary is not so good. Yet that is the scenario faced by nearly every beneficiary suing a Trustee.

The court does have the power to surcharge a Trustee who wrongly uses Trust funds to defend themselves.  A surcharge is just a judgment against the Trustee personally that must be paid to the Trust.  While this sounds promising to suing beneficiaries, it presents two large problems: (1) this determination only comes at the END of a lawsuit (meaning a Trustee can use money during the suit), and (2) courts rarely make a finding of personal surcharge.  Why no surcharge?  Because the court has wide discretion to decide when and if the Trustee wrongly spent Trust money on legal fees.  And California courts tend to be conservative when requiring a Trustee to pay back legal fees.

Bottom line: only in the most egregious cases will a personal surcharge against a Trustee be imposed.  Of course, you can still ask for a surcharge, just don’t count on that happening any time soon (if it happens at all).

In the meantime, any third-parties who sue the Trust are in for a fight…assuming the Trustee lives up the the very important duty to defend the Trust.